Critical trend investors must watch

Interest movements have a telling effect on the movement of stock prices and every investor should keep a keen eye on the direction of interest rates for clues to the direction of the market.
Interest rate movement is only one factor, the other critical one is profit. The attached chart shows clearly the relationship between the two and highlights the sharp rise in the JSE against the steep fall in interest rates from 9.1 percent to 5.45 percent now for the 182 days instrument.
Why investors need to keep an eye on interest rates? Apart from the relationship with stocks, the chart of the trend of Treasury bill rates, shows resistance just below 6 percent to rates falling, now solidly broken, with the likelihood of rates on Treasury bills, heading to the 4 percent range before too long. Such a fall would translate to about a Twenty five percent fall in rates and by extension, a rise to around the same level in the value of stocks, assuming no change in profit expectation and would push the All Jamaica Composite index to 360,000 points.